MetLife quizzed over 1,200 Americans about what they need for a financially secure retirement. Unfortunately, the majority answered just five out of 15 questions correctly.
MetLife released findings on Oct. 11 from its 2011 MetLife Retirement Income IQ, a quiz designed to measure retirement literacy of pre-retirees. The quiz found that retirement concerns like life expectancy, inflation, savings, long-term care insurance and to some extent Social Security are a source of confusion for many Americans.
Over 60% realize that the greatest risk to their retirement is longevity and almost one-third cite having enough income to cover basic expenses is their top retirement concern. While the percentage of pre-retirees who recognize the importance of Social Security and Medicare in their retirements has increased, just 17% know that they can increase the amount they’ll receive by 24% by waiting three years to begin claiming benefits. Forty-five percent said they are likely to work longer than previously planned.
“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,” Sandra Timmermann, director of the MetLife Mature Market Institute, said in a statement.
Almost 30% believe they should withdraw between 7% and 10% from their retirement accounts each year, while 11% believe they can take between 11% and 15%. On average, respondents believed they would need about 61% of their current income to cover basic expenses.
“The ‘replacement ratio’ of the percent of pre-retirement income necessary to manage essentials, including basic expenses, in retirement is often underestimated and too many people overestimate how much of their savings they can safely withdraw each year,” Timmerman added. “Employers and others advising Americans should be helping pre-retirees to ‘connect the dots’ so, given the uncertain economic climate, they can have a clear picture of their prospects and the financial income strategies needed.”
Unfortunately, 42% of respondents still believe that Medicare or their health or disability insurance will pay for long-term care. “Costs for ongoing long-term care services provided at home, in an assisted living facility, or in a nursing home can be significant and can adversely affect one’s plans for retirement,” according to MetLife. “Long-term care insurance is the only insurance designed to help cover the costs of long-term care services.”