Retirement concerns: is financial literacy the solution? Those workers that do have a 401k aren’t saving enough to cover expenses in retirement, even when employers match contributions.
Retirement is a far-off goal most Americans don’t even think about while they’re paying down debts, struggling to pay for childcare and taking care of aging parents. It’s become so disconnected from reality that 20 percent of Americans are actually basing their retirement plans on winning the lottery, according to research by Stash.
Americans Are Not Saving Enough for Retirement
Not saving enough for retirement is the number one fear among middle-income earners, and with good reason. Four researchers at Kellogg School of Management at Northwestern University recently found three-fourths of American workers with defined contribution plans like 401(k)s aren’t saving enough to maintain their standard of living later in life.
Can Financial Literacy Solve Retirement Concerns?
Nearly half of U.S. adults failed to correctly answer basic financial literacy questions in a recent annual assessment.
The P-Fin Index by the TIAA Institute asks 28 questions across eight functional areas of finance including: earning, consuming, saving, investing, borrowing/managing debt, insuring, comprehending risk and go-to information sources. American adults scored highest in the area of borrowing/managing debt and lowest in comprehending risk.
This year, the P-Fin Index included several new questions indicative of financial wellness. According to the report by TIAA Institute, “Greater financial literacy is positively associated with the capacity to handle a financial shock, saving for retirement on a regular basis, being unconstrained by debt and other indicators of financial well-being.”
Financial Wellness Programs and Financial Literacy
Financial literacy is indicative of financial wellness and high school curriculums across the country are adding personal finance courses as a requirement for high school graduation to start addressing the widespread lack of financial literacy.
What about the half of U.S. adults who couldn’t answer basic financial literacy questions? How can they learn the skills they need when they don’t know where to begin?
Financial wellness programs help workers improve financial literacy, pay down debt and save for retirement. They are a valuable employee benefit and with the right financial wellness program, like Best Money Moves, employees are given the tools and resources to help them attain financial literacy while they better their financial wellness.