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Time to take retirement into their own hands: Over 80 percent of women fail retirement income literacy quiz

Time to take retirement into their own hands: Over 80 percent of women fail retirement income literacy quiz

A third of women surveyed said they are extremely knowledgeable about retirement income planning

BRYN MAWR, PA, July 24, 2017 -- Only 18% of retirement-age women can pass a basic quiz on how to make a nest egg last in retirement. Nearly twice as many retirement-age men are able to pass, and although those numbers are still grim, this underscores the trouble women face in their own retirement knowledge. Even more worrisome is that despite low retirement literacy, the majority of women (55%) are still extremely confident that they and their spouses would have enough money to retire comfortably.

These findings are part of the RICP® Retirement Income Literacy Survey from The American College of Financial Services – the most comprehensive survey exploring the drawdown phase of Americans' financial lifetimes, when people are no longer receiving a paycheck from their jobs but must still fund their lifestyles during a potentially lengthy retirement.

Retirement Income Literacy: Women vs Men (selection)

Knowledge Categories % Correct Women % Correct Men
Annuity products in retirement 16% 24%
Company retirement plans 30% 40%
Investment considerations in retirement planning 31% 49%
Strategies for sustaining income throughout retirement 34% 48%
Paying for long-term care expenses 38% 35%
Medicare insurance planning 76% 76%
Passed Quiz 18% 35%

 

Women demonstrated lower literacy rates in 10 out of 12 knowledge categories. There was a discrepancy in performance between men and women across the areas of annuity products in retirement (16% vs 24%), company retirement plans (30% vs 40%) and investment considerations in retirement planning (21% vs 49%). However, women performed just as well as men (76%) on the topic of Medicare insurance planning and actually exceed on the topic of paying for long-term care expenses (38% vs 35%), which is important as women live longer on average.

Retirement Income Literacy: Don't Know, Don't Care

Women are aware that they have poor retirement literacy – yet this does not impact their confidence in retirement. Only a third (33%) of women stated they were extremely knowledgeable about retirement income planning, compared to 44% of men. However the majority of women (55%) reported they were extremely confident they would have enough money to live comfortably throughout retirement.

  • Only 24% of extremely confident women could pass the quiz while roughly 42% of the extremely confident men could pass the quiz.
  • In all 12 knowledge categories – including strategies for sustaining income, life expectancy, and life insurance – women reported lower self-perceived retirement income planning knowledge than men.

"Women face considerable challenges when it comes to preparing for retirement, and lacking financial literacy certainly does not help the cause," said Jocelyn Wright, State Farm® Chair in Women and Financial Services and Assistant Professor of Women's Studies at The American College of Financial Services. "This is a problem, especially when a female at age 65 can expect to live another 20 years on average, two years longer than the average man. With this in mind, women cannot depend on their spouse to hold the keys to their retirement. It is time to get smart on how to navigate this complex and extremely important stage of life."

Financial Decision-Making: Riding in the Passenger's Seat

Men tend to think they are the primary decision maker while women tend to believe that they split the decision making. In fact, there is a disconnect between finances being a team effort. Eighty percent of women said that they shared the decision making with their spouse while only 35% of men stated they shared the decision making. Women were also less likely to use resources such as friends or the internet for advice and information around financial assets.

  • Only 20% of women responded that they were the primary financial decision maker, compared to 65% of married male respondents.
  • Only 27% of women stated that they consult friends for advice and information about financial assets, compared to 39% of men.
  • 46% of female respondents looked up financial information online at least once a year, compared to 61% of male respondents.

Interestingly, women respondents who identified themselves as the primary financial decision maker in the household were more than twice as likely to pass the retirement literacy quiz (26%) than those that identified themselves as sharing the decision making (12%).

Silver Lining: Knowing Where to Turn

Although the majority of women are lacking retirement income literacy, most do understand the value of a financial advisor and believe advisors are a good source of knowledge around retirement income. The survey found that women were just as likely as men to consult a financial advisor or a financial services firm to get financial information. Women also had different expectations from their advisor.

  • About half (55%) of women with a financial advisor stated that it is extremely important that their financial advisor educate them about the risks of running out of money in retirement, as opposed to only 42% of men.
  • Additionally, 60% of women said it is important to receive education from an advisor about investment management, as opposed to only 47% of men.

"All people, regardless of gender, should be equipped with the knowledge that could better prepare them for retirement," said Jamie Hopkins, Retirement Income Program Co-Director at The American College of Financial Services. "Women face a number of challenges that the average man does not face in retirement, including greater longevity. So in some ways women should be more aggressive investors and have better retirement income literacy rates as they need to make their money last even longer in retirement."

Methodology

The American College of Financial Services commissioned Greenwald & Associates for the study. Respondents were asked a number of knowledge, behavior, and attitudinal questions about retirement income planning.

Information for this study was gathered through online interviews conducted between February 16–March 1, 2017. A total of 1,244 Americans were interviewed. To qualify for participation in the study, respondents had to be ages 60-75 and have at least $100,000 in household assets, not including their primary residence.

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About The American College of Financial Services

The American College of Financial Services was founded in 1927 and is the nation's largest non-profit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has educated one in five financial advisors across the United States and offers prestigious financial planning designations such as the Retirement Income Certified Professional® (RICP®), Chartered Life Underwriter® (CLU®), Chartered Financial Consultant® (ChFC®) and education leading to the Certified Financial Planner® (CFP®). It recently approved conferral of PhD degrees to the first class of graduates of that program. The College's faculty represents some of the foremost thought leaders of the financial services profession. For more information, visit TheAmericanCollege.edu.