(01:04):
Hello and welcome to this week’s episode of the Her Retirement Podcast. As I was thinking about what I wanted to speak about this week, I saw an article about a T I A A institute study that kind of stopped me in my tracks because the title of the study is Financial Literacy, Longevity Literacy, and Retirement Readiness. And those are all real buzzwords, keywords in my vernacular as I am talking about her retirement and retirement planning topics. Of course, financial literacy is a huge part of the Her retirement platform, and my personal mission, longevity literacy, might be something new to listeners. I’m going to get into exactly what that means. And, of course, retirement readiness, I talk about that all the time. Are we ready? I actually have a self-assessment right on the homepage of the Her Retirement website where you can find out if you are truly retirement ready, not only in the areas of wealth but health and happiness.
(02:13):
And if you haven’t checked out that, do it yourself an assessment. Go to the homepage of the Her Retirement website and definitely take that. You’ll get an email with the results of your assessment, giving you some indication of where you are ready and where are some gaps and some suggestions on how to fill those gaps. But back to this very interesting T I A A report, six years of data from the T I A A Institute clearly demonstrates that US adults with greater financial literacy tend to have better financial well-being. This report that I’m about to talk about shows that retirement readiness, which is, of course, a specific part of financial well-being, likewise, tends to be better among those with greater financial literacy. In addition, the report shows that retirement readiness is also related to longevity literacy. While this is typically an overlooked factor, the importance of longevity literacy is really not surprising since retirement income security inherently involves planning for the time that will be spent in retirement, which of course, is uncertain for all of us, right?
(03:34):
We don’t know how long we’re going to live, and that’s the essence of longevity. So data from the 2022 P Fin Index, it’s called shows that retirees with high financial literacy were more likely to plan and save for retirement while still working compared to retirees with low financial literacy. That’s why I always kind of preach that the more you know, the more you’ll have because once you start learning about all this stuff, you’re just automatically incentivized to plan, right? It. It means that those who have a plan will accumulate more, have more, and have a better, more intentional, and financially secure retirement. The ultimate outcome is that those with high financial literacy tend to have a better financial experience in retirement. So, for example, retirees with high financial literacy are more likely to find it easy to make ends meet. Many more report that their lifestyle in retirement exceeds or meets their pre-retirement expectations, and more are very satisfied with their current financial condition.
(04:56):
For the first time since its inception, the 2022 P F N Index survey gauged longevity literacy with a question addressing longevity knowledge, specifically life expectancy at age 60. I actually just did a TikTok on this asking people if they knew the longevity of the average man, a healthy man, and an average healthy woman, both non-smoking for women, it’s 81, and for men, it’s 85. And I had people surprised they were like, no, it’s more like 74, 75. Well, those are life expectancy ages at birth. This is if someone lives to 60, what is their life expectancy? So the older you are, the longer you’ll live. The question of longevity knowledge assesses whether someone has a basic understanding of how long people tend to live in retirement. And as with financial literacy, retirees with strong longevity literacy were more likely to plan and save for retirement while still working compared with those with poor longevity knowledge.
(06:10):
And they also tend to experience better financial outcomes in retirement. These findings are pretty significant given that many Americans do, in fact, face the prospect of financial insecurity in retirement. The challenge is that longevity literacy, like financial literacy, tends to be low among US adults. Only 37% have what is called strong longevity knowledge. This challenge could be turned into an opportunity as these findings demonstrate that initiatives to improve financial literacy and longevity literacy could strengthen retirement security, which of course, is something we all want. Longevity literacy is really fundamental in this context as appropriate decision-making is really contingent upon understanding how long your retirement might last. So the point is, is yes, financial literacy, get smart, understand the financial concepts, understand your gaps, your risks, your opportunities, the strategies that many people aren’t aware of that could change your retirement outcome, but also understand longevity.
(07:33):
And there’s actually even a tool, and I may have mentioned it on another podcast where you can go to the website, it’s called Living two hundred.com. It asks you a series of questions, and it does its best bet <laugh>. It does its best to protect your longevity. Of course, you can look at family members, parents, siblings, and genetics to get an idea of longevity. I was actually posting a TikTok and a video on Instagram and Facebook, and I got so many comments from people saying, well, I’m taking social security at 62 because so many people dropped dead at 63, and I want to take it while I can. And the people that have commented, which have been a lot, really seem to think that they’re not going to live much later into their sixties, which is kind of sad on the one hand because I know so many happy, healthy 60-year-olds.
(08:32):
And I, I don’t know, I guess, you know, it’s personal, it’s a personal decision and personal choice. But I think that there’s probably a significant number of Americans that are like, hell no, I won’t go. I’m living to a hundred <laugh>, and you can count me in that group. Financial literacy really matters in its relationship to financial well-being. And I talk about this all the time. I use financial well-being on the Her Retirement website because that’s really what my platform is all about. Six years of data from the T I A A institute and the P F N Index clearly, clearly demonstrates that US adults with greater financial literacy tend to have financial, tend to have better financial well-being, and the relationship holds when controlling for other factors such as age, income, and education. And, of course, this relationship has been documented in other research as well.
(09:38):
But how strong is this relationship with respect to a specific realm of financial well-being, which is retirement readiness? Well, many Americans face the prospect of financial insecurity and retirement, as I mentioned earlier. And according to a 2021 survey of household economics and decision-making, there were some things that were discovered, some statistics; let me share those with you. One-fourth of non-retired adults have no retirement savings. So a quarter of non-retired adults have no retirement savings. Only 40% of non-retirees think their retirement savings are on track. Among non-retirees age 60 and older, 13% have no retirement savings, and 48% do not think their retirement savings are on track. Among those aged 45 to 59, the analogous figures are 16% and 55%, respectively. Almost 60% of non-retirees with retirement saving accounts report low levels of comfort in making investment decisions with their save data from the 2022 p, and the index also highlights some critical findings.
(11:04):
32% of workers do not save for retirement on a regular basis. Only 22% of those saving for retirement are very confident that they’re saving an adequate amount. 47% of those saving have not tried to determine how much they need to save for retirement. Even among current retirees, 19% have difficulty making ends meet in a typical month, which is a really, really sad state of affairs. And 24% report that their lifestyle in retirement has fallen short of pre-retirement expectations. So is greater financial literacy a viable avenue to help improve retirement readiness in the United States? It might increase financial literacy among the population and help improves retirement income security outcomes. While the 2022 P F I N Index was designed to provide such insights by including questions indicative of retirement readiness alongside a comprehensive 28-question financial literacy list, the survey also included a question gauging longevity literacy. Achieving retirement income security inherently involves planning for an uncertain retirement span. It follows that longevity literacy, like financial literacy, is likely very important for retirement readiness. So let’s dig into this a little bit. I want to explore the relationship between financial literacy and retirement readiness.
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Retirement is better for those who have prepared for it, period. It’s what I say all the time at her retirement. It’s what my whole website is all about. Information on retirees’ past financial decision-making and current experiences really help us analyze the relationship between financial literacy and retirement readiness. In fact, data on retirees show a positive relationship between literacy, financial literacy, and retirement readiness along multiple dimensions. Retirees with very high levels of financial literacy are more likely to have one saved for retirement on a regular basis planned for retirement. I.e., like to try to determine how much they need to save and accumulate. And three, they’ve accumulated greater knowledge about ways to draw income from savings during retirement. We call that the distribution phase. It follows that those retirees with greater financial literacy report having better personal finance experiences in retirement. Retirees with very low levels of financial literacy are more likely than retirees with very high financial literacy, too, typically finds it difficult to make ends meet. And two, spend ten or more hours per week on personal financial issues and problems, which is a problem.
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Finally, positive evaluations of personal finances are more common among retirees with greater financial literacy. More specifically, compared to retirees with very low levels of financial literacy. Retirees with high levels of financial literacy are more likely to, one, be satisfied with their current financial condition and, two, feel that their retirement lifestyle exceeds or meets their pre-retirement expectations. And, I think you could make an argument that having financial literacy, retirement readiness, and some comfort in knowing what’s happening with your finances and knowing that you are going to make it in retirement or that you are doing the right things to make it in retirement, is going to lead to much more peace of mind, less stress, more happiness. And guess what That means? You’re going to be healthier. So financial literacy and financial well-being have a direct impact on your mental and physical help. So very important people, this is what I talk about all the time.
(15:22):
So to wrap up this episode of my podcast, I think there’s really tremendous opportunity to help improve retirement security. And there are several ways to do that beyond, you know, appropriately planning and having the proper strategies and plan design. The findings of this report demonstrate that initiatives to improve financial literacy and longevity literacy can promote retirement security. This is important since even individuals who are auto-enrolled in 401K plans at like a default contribution rate and with default asset allocations should, at a certain point, proactively engage in their retirement preparation. So there comes a time where you need to say, okay, we’ve been accumulating, we’ve been accumulating, but what is my de-accumulation plan? What is my plan for retirement? As I noted previously in the podcast, longevity literacy is fundamental in this context. Appropriate decision-making is contingent upon understanding the inherent uncertainty regarding how long retirement will last.
(16:42):
So, my advice to you is, when you are doing your projections, whether you’re working with an advisor, if you’re using my Her Retirement software platform, which will help you project your income and your expenses over your retirement, regardless of how you’re doing it, spreadsheet, pen, and paper, whatever way you’re doing it, you need to make sure you have that longevity literacy, and you incorporate that into your planning. So, very important and good for you to listen to my podcast and be attentive to your retirement planning needs. And I want to encourage you to encourage other women, other people you know in your life, to do the same thing. We really need to focus on our retirement security. We need to make sure that it’s, it’s something that we start long before we get to retirement, but the closer we get, the more we have to kind of switch off the, you know, okay, it’s just about accumulating and retirement will be here someday. No, you’re going to wake up, and retirement will be here, and you need to have a plan. So get smart, and understand the impacts of long life and retirement. And I do believe, as I always say, when you know more, you’ll have more. Let’s get her done.