Weekly Insight: Financial Literacy of Retirees

It goes without saying that retirees and pre-retirees need a basic level of financial literacy. Retirees who manage their own money need substantially more financial knowledge than those who are working with a competent and trustworthy financial advisor. Nevertheless, it is easy to overestimate people’s knowledge of financial matters. That point was driven home recently by the results of one of the most comprehensive surveys of financial literacy of retirees ever conducted.


The Retirement Income Literacy Survey was conducted by Greenwald & Associates on behalf of the American College, which offers educational programs and certifications for financial advisors. The survey’s objective was to determine whether retirees and pre-retirees have the knowledge they need to plan for a financially secure retirement.


Online interviews were conducted with 1,244 Americans ages 60-75 who had at least $100,000 of investible assets. The survey included 38 quiz questions in 12 relevant topic areas: retirement planning, ability to maintain lifestyle, income generation, annuity product knowledge, Social Security, life expectancy, death of a spouse, taxes, inflation, housing, medical insurance, and long-term care. This survey is a follow-up to a similar survey conducted in 2014.

Most studies of financial literacy focus on the pre-retirement accumulation period. This study focused on people who were 60-75 years old, a period where issues such as how best to withdraw income from investments and how to insure and manage financial risks in retirement come into play.


Suffice it to say, the results were dismal. They were so bad that I thought the survey must have used trick questions or at least poorly worded ones. So, I took the quiz myself. Either I am a very good guesser or this quiz was passable. I got 37 of 38 questions correct.

I am confident that my clients would do better than the average survey participant. Only 26% of participants passed. Yikes! The most surprising stat was that only 5% got a “B” (80%) or better. The category where financial literacy was the lowest was annuities and the highest was housing. The average score on the three annuity questions was 20%. The highest scoring demographic was men with over $1 million of investible assets—49% of those folks passed.

Would you like to test your knowledge? Let me know if you TAKE THE QUIZ and how you scored. The quiz takes about 10-12 minutes. I pulled out a few representative questions and answers below in case you don’t want to take the entire 38 question quiz.

Sample questions:

  1. A 25% negative single year return in a retirement portfolio would have the biggest impact on the long term retirement security if it occurs:

    A) 15 years prior to retirement, B) at retirement, C) 15 years after retirement begins, D) the timing doesn’t matter, E) don’t know

  2. To maximize the safe withdrawal rate from a portfolio over a 30-year retirement period, it is best to hold ___in equities (stocks) throughout retirement:

    A) 0-10%, B) 25-35%, C) 50-60%, D) 90-100%, E) don’t know.

  3. Which of the following strategies is least likely to improve retirement security?

    A) saving an additional 3% of salary for each of the 5 years preceding retirement, B) deferring Social Security for two years past the planned retirement date, C) working for two additional years, D) don’t know.

  4. What is the proportion of the population that is going to need some assistance with activities of daily living (need long-term care) at some point?

    A) 10%, B) 25%, C) 50%, D) 70%, E) don’t know

  5. If a 100% mutual fund’s assets are invested in long-term bonds and interest rates rise significantly, then the value of the mutual funds shares…

    A) decrease significantly, B) increase significantly, C) will not change, D) may rise or fall depending on the type of bond, E) don’t know.

Answers to sample questions:

  1. B – only 34% of respondents answered this correctly
  2. C – only 56% of respondents answered this correctly
  3. A – only 33% of respondents answered this correctly
  4. D – only 18% of respondents answered this correctly
  5. A – only 34% of respondents answered this correctly

The bottom line here is respondents with higher financial literacy were more confident about their retirement, more likely to have a plan for long-term care and an estate plan, and more likely to have a written retirement plan in place.

Email us if you need any help with your retirement planning or just want a little tutoring in areas where your financial literacy needs a little brushing up.

Have a great week.

Jeremy A. Kisner, CFP®, CPWA® is a Senior Wealth Advisor at Surevest Wealth Management and author of book: A Good Financial Adviser Will Tell You.
Weekly Insight: Financial Literacy of Retirees was published: by
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