Results of a recent retirement quiz shows Americans need to do a lot of homework to master basic retirement issues. What are they missing?
The results of a recent retirement quiz show that most Americans need to do a lot more homework to master basic concepts of retirement planning. Unfortunately, retirement seems to be taking a back seat to more immediate concerns about jobs and the economy.
Americans who took a 15-question retirement quiz administered by MetLife over the summer answered, on average, only five of the questions correctly. The 1,213 test-takers who ranged in age from 56 to 66 showed persistent “misperception and isunderstanding” of core issues, such as saving for retirement and income in retirement, said the insurance giant in a prepared statement released this week.
“On the positive side, respondents are recognizing that they will live longer and that they will be dependent on Social Security and other steady lifetime income for their prolonged retirement,” said the company.. More than 60 percent of the participants correctly identified “longevity risk” – the risk of outliving one’s money - as the greatest financial risk facing retirees. That’s up from 56 percent in 2008 and 23 percent in 2003.
More respondents are recognizing the growing importance of Medicare and Social Security and other forms of steady income – 45 percent in 2011 compared to 33 percent in 2008, said Metlife, and 45 percent of the respondents said they are likely to work longer than previously planned.
Of concern, are the large gaps in knowledge revealed by the pre-retirees taking the retirement quiz. Only 17 percent knew that waiting three years before withdrawing Social Security benefits would add 24 percent to payments received. More than 40 percent of Americans incorrectly believed that health insurance, Medicare of disability insurance will cover the costs of long-term care.
Only 45 percent of participants knew that experts expect retirees will need 80 percent to 90 percent of their pre-retirement income to maintain their current standard of living. More than 40 percent said retirees can withdraw from 7 percent to 15 percent of their savings each year, but experts recommend retirees take out between 4 percent and 6 percent of their savings. Key concerns among the respondents were having enough income to cover essential expense (32 percent) and the ability to afford health care (18 percent).
“Everyone knows they’re likely to live longer, but most don’t realize that can mean living past age 85 and they fail to calculate how much money they will need for a steady and lasting income,” said Sandra Timmermann, director of the MetLife Mature Market Institute.
More immediate economic concerns appear to be occupying pre-retirees, according to new survey results from Millionaire Corner. The 682 respondents who have not yet reached full retirement expressed greater concern over the U.S. economy (31 percent), unemployment (14.5 percent) and current political leadership (18 percent). Only 12 percent ranked retirement as their top financial concern.