Hoarding disorder disproportionately affects older adults. While about 2 percent of the general population struggles with accumulating too many objects, hoarding impacts over 6 percent of people aged 65 and older.
Older Adults Are Failing at Retirement Planning, Study Shows
Research by the American College of Financial Services sheds light on the need for improvements in retirement financial literacy. The 2023 Retirement Income Literacy Study revealed that most adults ages 50 to 75 lack knowledge about retirement income. With this lack of knowledge came a lack of confidence about achieving the best possible retirement outcomes.
Just 15 percent of Americans have access to defined-benefit retirement plans. As a result, most workers must make independent decisions about retirement savings. As people age, they must also shift their thinking from saving and investing to how to draw retirement income.
The study identified low financial literacy scores in those approaching retirement age as well as retired people. Consequently, making financial decisions in older adulthood may be challenging for many.
Professionals, such as financial advisors and elder law attorneys, can help educate individuals about retirement strategies. Working with a professional may also lead to a greater sense of security in retirement.
Retirement Income Literacy: A Failing Score
Doing well in retirement can depend in part on understanding a diverse set of topics – from investment and financial planning options to interest rates and long-term care. The researchers tested nearly 3,800 study participants on topics related to retirement, financial goals, and more. These 12 knowledge areas were as follows:
- Retirement Income
- Inflation
- Housing
- Annuities
- Life Insurance
- Long-Term Care
- Medicare
- Social Security
- Life Expectancy
- Taxes
- Retirement Plans
- Investments
The overall retirement income literacy score was just 31 percent – a failing grade.
Scores were lowest for participants with fewer assets. According to the researchers, this highlights the need for people with limited means to increase their retirement financial literacy. Individuals with more assets, meanwhile, scored twice as high.
Greater Confidence Among Those with Higher Financial Literacy Scores
In addition to having more assets, those who scored higher on retirement financial literacy said they felt more financially secure than those with lower literacy scores. They also were more likely to believe they had a sufficient amount of money for a comfortable lifestyle and could handle investments during retirement. Working with a financial advisor also appears to increase confidence, according to the findings.
Results Across Knowledge Areas
In examining 12 knowledge areas, the study revealed strengths and areas that need improvement among older adults.
Respondents generally scored higher in certain areas than the average score of 31 percent. They knew more about inflation, housing, Medicare, life insurance, and Social Security than the other topics. Still, scores were low; the highest score, which was for inflation, was just 47 percent.
Participants displayed especially low literacy in annuities, investments, and long-term care. The average literacy score for annuities was the lowest at 12 percent.
The researchers noted that participants demonstrated greater knowledge of issues currently affecting them, such as inflation. Yet certain knowledge areas could become important later. For example, people may come to rely on annuities and investments for income when they retire. However, the study suggests they do not tend to learn about these topics before they stop working.
Another area where individuals lacked knowledge was life expectancy, where respondents scored 27 percent.
Participants tended to misjudge life expectancy. A consequence of misjudging life expectancy is a lack of preparedness. Those who think they will die younger may not have enough saved to cover costs like housing, medical expenses, and long-term care in their later years.
Demographic and Socio-Economic Factors
The Retirement Income Literary Study also highlights disparities by race, gender, education, wealth, and retirement status.
- People who identify as white or “other” races had higher retirement income literacy scores.
- Men consistently had higher scores than women.
- Earning a graduate degree was associated with higher scores. Scores increased as individuals’ highest level of education increased.
- Wealthier people scored better, and higher retirement income literacy correlated with greater investible assets.
- Retired people had more financial literacy than those yet to retire.
Having a financial advisor was also associated with significantly better outcomes across the board. In fact, those with a financial advisor scored higher on average in retirement income literacy across every category. They had better financial well-being, measured using the Consumer Financial Protection Bureau Financial Well-Being Scale. People receiving financial advice also had greater confidence about retirement.
Speak to an Elder Law Attorney
In planning for retirement, working with a financial advisor can, as the study results suggest, be extremely helpful. Qualified elder law attorneys can play a critical role as well. They can help you assess your long-term options, understand various benefits programs, and work with you to create a legal plan that preserves your autonomy as you age.
Find an elder law attorney near you today.
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