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Study Finds That Improving Financial Literacy Supports Retirement Wellness and Confidence

The American College of Financial Services shares the fourth iteration of the Retirement Income Literacy Study to gauge older Americans' retirement knowledge, highlight gaps and opportunities

The American College of Financial Services 2023 Retirement Income Literacy Study finds that older Americans lack actionable retirement knowledge—averaging 31% on a retirement literacy quiz. The study reinforces the direct relationships that exist between financial literacy and factors such as asset level, as respondents with more than $1.5 million score twice as high as those with less than $100,000 (50% vs. 25%). The study also reveals the essential role financial professionals play in educating clients, as advised respondents have higher retirement income literacy and better outcomes than their peers.

The study comes at a time when more Americans need to ensure they will have enough money to last throughout their lifetimes. The much-discussed Baby Boomer wave will crest in 2024, with 12,000 retiring every day. With the "Graying of America" and the median age of Americans going up, it is more important than ever to plan for longer, well-lived lives, considering long-term care needs and replacing more of their pre-retirement income.

"In the U.S., with the exception of Social Security and the comparatively small number of workers with guaranteed pensions, saving for retirement is voluntary. This requires the consumer to know how much to save, where to save it, and how much to drawdown at retirement," says Steve Parrish, JD, RICP®, CLU®, CHFC®, AEP®, Professor of Practice at The American College of Financial Services. "This necessitates understanding basic concepts about investing, taxes, insurance, and finances. To measure how prepared Americans are for retirement, an important consideration is how knowledgeable consumers are about retirement. Call it 'literacy,' 'aptitude,' or 'competence,' do Americans know enough to take on the burdens that come with the freedom of voluntarily saving for retirement?"

This is why, for the last nine years, The College has conducted a comprehensive survey of retirement income literacy. Information was collected on the level of knowledge of 12 key retirement-related knowledge areas. While there has been a good deal of attention on financial literacy, almost all those studies have focused on the accumulation period. This study focuses on those ages 50-75, a period where issues such as how best to withdraw income from assets come into play and how to manage finances in retirement is critical.

Key Findings Highlight Gaps and Opportunities

One of the more eye-popping results that caught The College research team's attention was how well respondents' self-ratings of their retirement income knowledge matched up with their actual scores on our literacy test. "Among those who didn't rate themselves very highly in terms of retirement knowledge, a whopping 73% had less than $100,000 saved up for retirement. Compare that to the group at the other end of the spectrum—those who felt confident about their retirement smarts. 81% of this group had savings above $100,000," says Eric Ludwig, PhD, CFP®, Retirement Income Certified Professional (RICP®) Program Director and Director of the American College Center of Retirement Income at The American College of Financial Services.

Retirement Knowledge Powers Confidence
One measure—and perhaps the most significant indicator—of retirement outcomes is confidence. The study uses a Retirement Confidence Scale based on respondents' self-reported confidence that they will feel financially secure, have enough money to live comfortably, and do a good job handling their investments throughout retirement. The 2023 Retirement Income Literacy Study reveals the predicted probability of the highest Retirement Confidence level increases with Retirement Income Literacy Score. Put simply: As retirement planning knowledge improves, so does confidence.

Americans Struggle With Unfamiliar Topics
Direct experience seems to contribute to applied financial knowledge in certain areas, yet the unknown may catch Americans unprepared. Although both overall scores and underlying scores on the 12 retirement knowledge areas are low across the board, respondents show significantly greater knowledge of certain areas having to do with lived experience, including inflation, housing, and Medicare—all of which garner higher scores than the overall average (31%).

The study also explores the topic of longevity—an essential knowledge area to understand when planning retirement income to last a lifetime. Americans consistently underestimate life expectancy and are unaware of how long individuals tend to live, with just over one in five (22%) expecting to live past 89 and just over one in four (27%) able to correctly identify the average life expectancy of a man at age 65. This is particularly concerning because so many Americans plan to supplement their Social Security with their 401(k) and IRA accounts. If they underestimate their own life expectancy, they risk exhausting their savings in retirement—potentially outliving their assets.

One Size Doesn't Fit All
Retirement planning knowledge is highly variable across different parts of society. Generally, more assets, higher education, male gender, White or "Other" race, and greater life experience (including age and retirement status) correlate to higher Retirement Income Literacy Scores. The research highlights disparities across different demographic segments, including:

  • Respondents score higher the more investable assets they have.
  • Respondents who have earned advanced degrees score highest, followed by college graduates.
  • Men consistently score higher than women, currently and in the past.
  • White and "Other" respondents, including Asian/AAPI respondents, score higher than Black and Hispanic respondents.
  • Retired respondents score higher than non-retired respondents.

"In the complex realm of financial planning, the idea that a one-size-fits-all approach suits everyone is a misconception. Just as each person is unique, their financial strategies should be tailored accordingly, particularly regarding retirement income planning and considerations for long-term care and health care," says Kaylee Ranck, PhD, Director, Office of College Research at The American College of Financial Services. "Developing personalized plans that take into account individual goals, projected lifespan, and specific healthcare requirements within the constantly evolving and intricate landscape of retirement is essential for ensuring a secure financial future."

Financial Advisors Can Help Bridge Knowledge Gaps
The study establishes a compelling link between retirement literacy and working directly with a financial advisor. Advised respondents have higher scores across all knowledge areas, are more financially well, and feel more confident about retirement.

  • Participants with ongoing advisory relationships scored 11 points higher on retirement income literacy than those without (38% vs 27%).
  • Those who work with financial advisors score nine points higher than those who don't (50% vs. 41%) on financial well-being, measured using the Consumer Financial Protection Bureau Financial Well-Being Scale.
  • Having a financial advisor predicts increased confidence and decreased stress and anxiety, controlling for demographic factors.

"While this most recent iteration of the Retirement Income Literacy Study reiterates the themes found in most financial planning research concerning the lack of financial and retirement literacy, one thing that became abundantly clear this time around was just how important the role of the financial professional is in consumers' lives," says Chet Bennetts, CFP®, CHFC®, CLU®, RICP®, CLF®, CFP® Certification Education and Chartered Financial Consultant® (ChFC®) Program Director at The American College of Financial Services. "When we measured financial anxiety and financial stress, those with a financial professional had 20% less financial anxiety and 25% less financial stress."

With robust results from surveying more than 3,765 Americans aged 50 to 75, the Retirement Income Literacy Study research team plans to release additional data to provide deeper analysis into topics highlighted here–plus additional perspectives yet to be revealed. For more information and to view initial and future results, visit

The 2023 Retirement Income Literacy Study conducted by The American College of Financial Services measures financial literacy in 12 retirement-related knowledge areas among individuals approaching or in retirement age. Researchers from The College surveyed 3,765 Americans aged 50 to 75 in online interviews conducted in August 2023. The data was collected to match the 2020 U.S. Census for gender and race. Building on studies conducted in 2014, 2017, and 2020, the 2023 study included respondents of all asset levels, whereas prior versions focused on respondents with a minimum of $100,000 of investable assets. The insights derived will shape The College's educational initiatives, collaborations, and thought leadership endeavors.

Founded in 1927, The American College of Financial Services is the nation's largest nonprofit educational institution devoted to financial services professionals. Holding the highest level of academic accreditation, The College has educated over 200,000 professionals across the United States through certificate, designation, and graduate degree programs. Its portfolio of applied knowledge also includes just-in-time learning and consumer financial education programs. The College's faculty represents some of the foremost thought leaders in the financial services industry.

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Annuity Alliance is not affiliated with the American College of Financial Services. This article is for informational and educational purposes only. It should not be used to make a buying decision. If you would like to speak with a financial professional, please use Annuity Alliance’s contact form.