Americans feel more financially secure than they did five years ago, despite financial literacy being low, according to a survey released Thursday by Financial Engines.
Almost half of Americans surveyed said they feel more secure than they did in 2012, but only 6% were able to pass a financial literacy quiz.
- Over half underestimated the appropriate amount of life coverage for their situation.
- Nearly two-thirds didn’t know they can defer Social Security benefits until age 70.
- Less than a quarter are confident about claiming Social Security benefits at all.
“It’s not surprising that Americans are feeling better about their financial situations given low unemployment and a record-breaking stock market,” Andy Smith, senior vice president of financial planning at Financial Engines, said in a statement. “But as our quiz shows, there’s a persistent problem with financial literacy in this country. When it comes to your finances, poor decisions you make today can cost you for the rest of your life.”
Financial Engines found that people struggled most with questions about their long-term financial well-being. Subjects like Social Security, planning for health care in retirement and determining their life insurance needs were areas where they needed the most help.
When asked to estimate how much they would need for health care, three-quarters of those between ages 55 and 64 and nearly 60% of respondents closer to retirement guessed between $50,000 and $200,000.
A 2015 report by HealthView Services put a married couple’s estimated cost of health care in retirement, including insurance premiums, co-pays, dental, vision and out-of-pocket costs, at nearly $400,000.
“Often, people don’t have a realistic idea of their cost of living or how expensive things will be in retirement,” Smith said. “While each person has a unique financial situation, it’s important to remember that you are not alone.”
Smith noted that advisors’ value to investors isn’t going unrecognized, as employers increasingly offer “financial planning resources as a benefit to their employees, often at a significantly discounted rate and without the asset minimums that many financial advisors require.”
— Read Married Women Need Their Own Financial Plan: Study on ThinkAdvisor.