Managing expectations and taking a proactive approach to improving clients’ overall understanding of retirement income planning is an important part of the responsible financial advisor’s job. With so many important decisions to be made that impact the rest of the individual’s life, comprehension of retirement income — needs, concepts, numbers, risks and so much more — is a must. 

Paper with failing grade of 29% on retirement literacy 

But while there have been many documented studies measuring Americans’ overall financial literacy, not much had been done to gauge their retirement income literacy. Not until The American College of Financial Services conducted a Retirement Income Planning Quiz, that is.

If you are of the opinion that the average American has a good understanding of retirement planning, think again. In 2014, The College conducted 1,019 online interviews with individuals between the ages of 60-75, with at least $100,000 in household assets. Below are six of the most disturbing findings gleaned from the quiz which, in case you missed the headline, America failed at an alarming rate.

  1. Only 19 percent of respondents passed the retirement income quiz, receiving a score of 60 percent or higher. Alarmingly, not even one respondent received an A (90 percent or higher), and only 1 percent scored a B (between 80 and 90).

  2. Respondents have a tenuous understanding of basic investment strategies and considerations, too. Only 39 percent of respondents understood that when interest rates rise significantly, the value of bond funds decrease significantly.

  3. Despite all the coverage about individuals living longer and Americans enjoying a higher life expectancy, more than half the respondents underestimated the life expectancy of a 65-year-old man, suggesting they may not realize how long their assets actually have to last.

  4. 65 percent of respondents admitted to not knowing very much about using annuities as retirement income strategies even though this strategy can prove successful for mitigating longevity risk.

  5. Only 31 percent of respondents know that $4,000 is the most that they can “safely” withdraw per year from a $100,000 retirement account, despite the massive amount of press that the 4-percent rule has received over recent years.

  6. Perhaps the most disturbing fact of them all is that only 54 percent of respondents realized that Social Security benefits increase each year that they defer claiming, until age 70.


Whether or not you find these facts to be unsettling, they point to a much bigger problem and that is the public’s lack of retirement income knowledge. Now, more than ever, it is crucial to help your clients understand the full scope of retirement income and investment options that exist, and how the decisions that they make now can significantly impact their retirement and beyond.

An educated client can be the best kind of client, so don’t miss our next post in this two-part series that details implications and recommendations for financial advisors in light of the lackluster quiz results.

If you’re interested in learning all the results and findings that came from this exercise in retirement income planning, check out “America Fails Retirement Literacy Quiz.”

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