Sur­vey says the world is un­pre­pared for re­tire­ment

Many in 15 coun­tries failed test, sug­gest­ing con­se­quences ahead

The Dallas Morning News - - Your Portfolio - Suzanne Wool­ley,

Most on­line quizzes are rel­a­tively mind­less, promis­ing to re­veal what veg­etable, sand­wich or rock band best rep­re­sents your per­son­al­ity. That was not the case for a short on­line test given to more than 14,000 peo­ple in 15 coun­tries this year. It re­vealed just how un­pre­pared a good chunk of the world is for re­tire­ment.

The three-ques­tion test, given as part of the Ae­gon Re­tire­ment Readi­ness Sur­vey 2018, mea­sured how well peo­ple un­der­stand ba­sic fi­nan­cial con­cepts. Many of the par­tic­i­pants failed the quiz, with big po­ten­tial con­se­quences for their fu­ture se­cu­rity.

Be­yond the sober­ing lack of fi­nan­cial lit­er­acy, there was some rather cu­ri­ous data in Ae­gon’s an­nual sur­vey, which was pub­lished Tues­day. For ex­am­ple, some 20 per­cent of work­ers sur­veyed in China en­vi­sioned spend­ing re­tire­ment with a ro­bot com­pan­ion. But be­fore we get to that, take a look at this ques­tion — only 45 per­cent of peo­ple around the world got right: Do you think the fol­low­ing state­ment is true or false? “Buy­ing a sin­gle com­pany stock usu­ally pro­vides a safer re­turn than a stock mu­tual fund.”

The pos­si­ble an­swers? True, false, do not know and refuse to an­swer.

Six­teen per­cent of peo­ple got it wrong. “Do not know” was cho­sen by 38 per­cent. In the U.S., 46 per­cent of work­ers got it right. Good for you, Amer­ica. (The an­swer, in case you were won­der­ing, is false.)

It was an in­fla­tion ques­tion that had the high­est per­cent­age of wrong an­swers, how­ever. More than 20 per­cent of work­ers didn’t grasp how higher in­fla­tion hurts their buy­ing power. Given that de­clin­ing health was the mostcited re­tire­ment worry, at 49 per­cent, and health care is an area (in the U.S., es­pe­cially) with high cost in­fla­tion, well, that makes the sub­ject some­thing older folks should have down cold.

The sur­vey asked work­ers — about 1,000 peo­ple in each coun­try — what global trends would af­fect their re­tire­ment plans. “Re­duc­tion in gov­ern­ment re­tire­ment ben­e­fits” was the most pop­u­lar an­swer world­wide, cho­sen by 38 per­cent glob­ally; in Amer­ica, it was 26 per­cent. The coun­tries most wor­ried about cuts to gov­ern­ment ben­e­fits? Brazil and Hun­gary, at about 53 per­cent.

Con­cern with devel­op­ing Alzheimer’s or de­men­tia was cited by 33 per­cent glob­ally. The high­est per­cent­age of peo­ple cit­ing it as a worry were in Spain, at 53 per­cent. In the U.S., 31 per­cent were wor­ried about it.

Across the board, though, work­ers didn’t seem to rec­og­nize the huge im­pact that ba­sic changes in the la­bor force, tech­nol­ogy and the cli­mate will prob­a­bly have on their re­tire­ment plans, said Cather­ine Collinson, pres­i­dent of the non­profit Transamer­ica Cen­ter for Re­tire­ment Stud­ies and ex­ec­u­tive di­rec­tor of The Ae­gon Cen­ter for Longevity and Re­tire­ment.

“It makes me won­der about the ex­tent to which peo­ple are naive about the mag­ni­tude of the dis­rup­tion in our world, and the level of change that has not only oc­curred but is im­mi­nent,” said Collinson. “Is it that peo­ple don’t see it com­ing, or is it so over­whelm­ing that peo­ple are in de­nial?”

Many work­ers may well be in de­nial about how long they can ac­tu­ally work. The sur­vey found that work­ers gen­er­ally plan to re­tire around age 65. “The sober­ing re­al­ity is that 39 per­cent of re­tirees glob­ally re­tired sooner than planned,” ac­cord­ing to the re­port. “Of those, 30 per­cent stopped work­ing ear­lier than they had planned for rea­sons of ill health, and 26 per­cent due to un­em­ploy­ment/job loss.”

And those ro­bots? The sur­vey asked about “ag­ing friendly mod­i­fi­ca­tions or de­vices” peo­ple en­vi­sioned hav­ing in their homes. Thirty-five per­cent of work­ers in In­dia, 34 per­cent of work­ers in Turkey and 18 per­cent in the U.S. fig­ured ag­ing could in­clude video mon­i­tor­ing de­vices. Then there are the ro­bots, which 20 per­cent of Chi­nese work­ers see com­ing in re­tire­ment, com­pared with 6 per­cent of Amer­i­can work­ers.

The re­port is in­tended as a call to ac­tion, Collinson said. Rec­om­men­da­tions in­clude work­ing fi­nan­cial lit­er­acy into ed­u­ca­tional cur­ricu­lums, pro­mot­ing a more pos­i­tive view of ag­ing and al­low­ing univer­sal ac­cess to re­tire­ment sav­ings ar­range­ments.

With the tra­di­tional “so­cial con­tract” be­tween gov­ern­ment, em­ploy­ers and in­di­vid­u­als crum­bling, “the sooner we roll up our sleeves and get to work, the sooner we will be able to iden­tify and im­ple­ment so­lu­tions,” she said. Whether that’s in public-pri­vate part­ner­ships or im­ple­ment­ing more findings from the field of

be­hav­ioral fi­nance, “inaction is re­ally the en­emy.”

Here are the other two fi­nan­cial ques­tions. See how you do: Ques­tion 1: Sup­pose you had $100 in a sav­ings ac­count and the in­ter­est rate was 2 per­cent per year. Af­ter five years, how much would you have in the ac­count if you left the money to grow? More than $102 Ex­actly $102

Less than $102

Do not know

Ques­tion 2: Imag­ine that the in­ter­est rate on your sav­ings ac­count was 1 per­cent per year and in­fla­tion was 2 per­cent per year. Af­ter one year, how much would you be able to buy with the money in this ac­count? More than to­day Ex­actly the same as to­day Less than to­day

Do not know

The “Big Three” fi­nan­cial lit­er­acy ques­tions were cre­ated by Pro­fes­sors An­na­maria Lusardi of the Ge­orge Wash­ing­ton School of Busi­ness and Olivia Mitchell, of the Whar­ton School of the Univer­sity of Penn­syl­va­nia.

The an­swers: Q1. More than $102 (com­pound in­ter­est). Q2. Less than to­day (in­fla­tion).

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