Employees flunk retirement quiz
Working Americans of all ages are plagued by widespread misconceptions and procrastination that could undermine their retirement readiness — unless they devote enough time to learning basic concepts, Fidelity Investments’ first-ever Retirement IQ Survey finds.
Most notably, as many as two-thirds of the respondents underestimated what they will need to save for retirement.
While noting that progress has been made to move the needle on retirement readiness, Ken Hevert, SVP of retirement at Fidelity Investments, says the survey’s knowledge gaps point to the need for better education from employers.
“We recognize how important it is for employers to engage with their plan participants as early as possible because it’s often in the workplace where people first learn about what they need to do to prepare for retirement,” he says.
The survey identified procrastination as a serious concern. More than half of respondents confessed to putting off an important financial decision such as creating a budget, paying bills on time or saving for retirement.
Many people surveyed, including those age 55 and older, gave wrong answers to questions in nearly every category, even though it was a multiple-choice format, according to Hevert. He says the average grade was 30% (the equivalent of an F), no one answered all 14 questions correctly and 1% got all of the questions wrong. Fewer than 0.5% of respondents received a 79% (C+), which was the highest grade.
The question most people answered correctly concerned the age of Medicare eligibility (77% got it right).
Despite these poor test results, Hevert emphasizes that by spending just a few hours on the subject, employees can boost their Retirement IQ scores dramatically and develop a good grasp of the essentials needed to make smarter decisions that can put them on the path to a secure retirement. Employers also can help workers think about the goals they want to achieve and develop a plan to get there.