But not everyone is in a position to save a substantial amount of money. Americans working lower-wage jobs or supporting extended families will experience more problems saving cash. Others - even those with high-paying jobs - will have problems because they don't fully understand how to save money for retirement.
According to a survey from the American College of Financial Services, 74 percent of Americans ages 60 to 75 who have at least $100,000 in investable assets, failed a retirement income literacy test.
The survey asked 38 retirement questions covering everything from life expectancy and investment strategy to Social Security and Medicare. Only 26 percent of respondents received passing grades.
Even worse, less than 1 percent posted scores of 90 percent or better, and 60 percent received scores less than 50 percent.
Planning for retirement
Many Americans don’t have a plan in place for their retirement. The survey from American College stated only 34 percent of respondents had a written retirement plan in place. That's somewhat surprising considering more than half are at least moderately worried about running out of money in their post-employment era, and nearly two-thirds of respondents said they have a relationship with a financial advisor.
Five of the largest areas of concern
From the survey results, it was clear that more education is needed on the following:
- Preserving assets and sustaining income
Based on question answers, most respondents don’t know how to determine an appropriate withdrawal rate in retirement, and aren’t prepared to make their assets last as long as they may need them to.
- Improving retirement security
Many people miss opportunities to better position their nest egg due to the fact that they don’t fully understand how to best improve their retirement security.
- Understanding investments
Very few respondents understood the specific ins and outs of investments. Having poor investments can limit the amount of money one will have to spend in retirement.
- Long-term care knowledge
Despite the fact that about 70 percent of the population will need daily living assistance, knowledge on how that care is provided is low.
- Basic knowledge of annuities
Annuity strategies are one way to enhance retirement income, however more than half of those surveyed answered every annuity-related question incorrectly.
Three ways to improve your retirement knowledge
It’s crucial to be proactive when it comes to planning for your retirement and expanding your knowledge. Here are three ways to consider doing so:
- Talk with an expert on what strategy would best suit you
- Learning the ins and outs of retirement can be overwhelming. A financial expert will be able to guide you through the process and help you determine a strategy unique to you.
- Write it down
- Putting together a formal written retirement plan will not only help you to figure out your retirement strategy, but also serve as a guide throughout retirement. Having a written plan to refer back to years down the line will help keep you on track and will make it easier to adjust your strategy if needed.
- Start planning early
- The sooner you start to plan and prepare for retirement, the better off you’ll be. Having a plan in place long before you retire will help reduce some of the stress that comes from transitioning into post-employment life.