Researchers Put Americans' Retirement Literacy to the Test. The Results Weren't Pretty.

Stakeholders across the financial services industry have put a lot of effort into improving the average American’s financial literacy in recent years, but the truth is that people continue to struggle with retirement income literacy.

In fact, just one in five Americans earned a passing grade on a retirement quiz conducted recently by a team of researchers at the American College of Financial Services, and the average score was a paltry 31%.

There are some positive signs to be found in the data, according to the researchers, such as the fact that Americans who are older and nearer retirement seem to have at least slightly better knowledge about key financial concepts related to retirement.

There’s also good indication that people have a decent sense of their own knowledge levels, and that higher levels of educational and wealth attainment lead to higher levels of “retirement literacy.” So does working with an advisor, if only slightly.

Earlier this year, I had the chance to sit down for a podcast interview with two of the academics behind the quiz: Eric Ludwig, director of the Center for Retirement Income and program director for the Retirement Income Certified Professional (RICP) program at the American College, and Kaylee Ranck, director of college research.

As we discussed, the average quiz result may have been disappointing, but one silver lining is that the quiz itself can be a powerful tool in the hands of any advisor who serves clients facing the “decumulation challenge.”

Beyond testing their own knowledge on a range of important topics, advisors can use the results to pinpoint their clients’ income planning blind spots and create tailored educational resources. They can also foster some healthy office competition by challenging their colleagues and comparing results.

Those who are interested in learning more about the thinking behind the quiz can listen to the podcast recording. Ranck and Ludwig also speak about the educational opportunities available via the American College, particularly the RICP program.

If you enjoy the episode — or putting your own retirement knowledge to the test — please consider sharing with a client or colleague.

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