Americans Left Guessing for Their Golden Years: Four Out of Five Older Americans Fail Retirement Income Literacy Survey

Third comprehensive consumer study from The American College of Financial Services highlights wide knowledge gap in retirement income literacy, struggles with awareness of basic investment management, and unpreparedness for long-term care needs

King of Prussia, Pennsylvania, UNITED STATES

King of Prussia, PA, Sept. 15, 2020 (GLOBE NEWSWIRE) -- According to the 2020 Retirement Income Literacy Survey, four in five older Americans fail to understand the basics on how to successfully plan for a financially secure retirement, a concerning finding from one of the most comprehensive surveys on retirement income literacy. Retirees and pre-retirees (ages 50-75) displayed a lack of knowledge around awareness of income in retirement, basic investment management and understanding of long-term care needs – yet those with a written retirement plan in place reported feeling more prepared to navigate the COVID-19 pandemic than their counterparts did.

A majority of respondents are holding their financial plans steady amid the COVID-19 pandemic, yet just one in three report having a formal, written retirement plan in place.

These findings are part of the third iteration of the Retirement Income Literacy Survey from The American College of Financial Services, testing consumers’ knowledge about retirement income concepts and focusing on the drawdown phase when Americans have limited or no ability to earn additional money through work. This year’s study expanded the scope of those surveyed to include Americans ages 50-75.

 “With a troubled economy and an acceleration of early or forced retirements, consumer understanding of retirement principles is particularly important. Yet the survey demonstrates that retirement literacy remains troublingly low,” said Steve Parrish, JD, RICP®, CLU®, ChFC®, RHU®, AEP®, Adjunct Professor of Advanced Planning and Co-Director of the Retirement Income Center at The American College of Financial Services. “Financial advisors should take heed of this situation and embrace the opportunity it provides to help Americans prepare for a successful retirement.”   

Knowledge Gap Needs to Close in Retirement Income Planning and Investment Management

Retirement literacy in 2020 remains low overall, as was the case in The College’s 2014 and 2017 surveys, with eight in ten (81%) failing a 38-question retirement literacy quiz. In fact, the average score of the quiz was just 42%. This is further underscored by consumers’ own lack of confidence – only a third of consumers consider themselves highly knowledgeable about retirement income planning.

Among the financial planning elements driving low scores on the quiz was consumers’ particularly low level of knowledge about preserving assets and sustaining income in retirement:

  • More than half underestimate the life expectancy of a 65-year-old man, suggesting that many do not realize how long their assets may have to last.
  • Only 32% know that $4,000 is the most they can afford to “safely” withdraw per year from a $100,000 retirement account, suggesting most do not know how to determine a prudent withdrawal rate.
  • Only 35% know that a negative single year return in a retirement portfolio has the most significant impact on long-term retirement security if it happens at the year of retirement, suggesting a fundamental lack of knowledge about investment risk in the pre-retirement and retirement period.

 “Determining how much you can spend in retirement when you don’t know how long you will live or what market returns you will experience is complicated,” said Wade Pfau, PhD, CFA, RICP®, Professor of Retirement Income, RICP® Program Director, and Co-Director of the Retirement Income Center at The American College of Financial Services. “Unfortunately the task is even harder for Americans who do not recognize how to properly evaluate these risks in the first place, and who do not understand the lasting impact of a market downturn in the early years of retirement. The survey demonstrates that these retirees don’t fully understand the consequences a bad market can have on their long-term retirement prospects.”

Consumers also displayed a significant lack of knowledge when it comes to understanding investments, despite the fact that a majority self-report that they are at least moderately knowledgeable about investment management.

  • Just 26% understand that the value of bonds and bond funds falls as interest rates rise.
  • Just 28% know that actively managed mutual funds have higher fees than ETFs.
  • Only 18% know that B-rated corporate bonds have higher yield than AAA corporate bonds or treasury bonds.

Long-Term Care is an Afterthought Leaving Many Unprepared

The survey found that only three in ten (31%) have a plan in place for how to fund long-term care needs and only one in four (23%) have some sort of long-term care insurance coverage. Very worrying is the fact that most older Americans are split on whether they will even need long-term care insurance in the future:

  • Half (50%) say it is at least somewhat likely they will need long-term care services in the future.
    • Only 8% consider it very likely that they will ever experience a long-term care need, even though the reality is that 70% will.
  • 52% of respondents have not looked into long-term care insurance at all.
  • Just 25% know that family members provide the majority of long-term care services nationally, which is concerning as 70% of respondents do not expect their family members to provide the care, highlighting a disconnect in the planning process.

“The story coming from the data suggests that people underestimate their life expectancy – and what’s more, assume they will be healthy for the entirety of their life,” said Timi Jorgensen, Assistant Professor and Director of Financial Literacy at The American College of Financial Services. “Advisors can help with long-term care conversations, and they can work with clients to make a plan on when and how to have these crucial discussions with family about the likelihood of healthcare needs.” 

COVID-19 Preparedness: Better with a Written Plan

Nearly four in ten (39%) consumers reported feeling highly prepared for the market downturn associated with the pandemic. Interestingly, what made a difference in consumers’ perception of preparedness for the crisis was having a formal, written retirement plan:

  • Those with a written retirement plan (47% vs. 35% of those without) or a retirement income plan (43% vs. 22%) reported feeling more prepared to deal with the market downturn.
  • Yet only one in three (33%) respondents report having a written plan.

While many felt prepared, the pandemic has shifted the mindset of many investors. Four in ten (39%) say they now feel less comfortable taking investment risk. Only 8% say they’ve adjusted their allocations to be more conservative, but a realignment of risk tolerance is noteworthy. More than half (54%) of consumers said they are holding their financial plans steady.

“A bottom-line conclusion from this survey is that until the plan is written, it isn’t real. And the pandemic showed that those with a real plan are in better shape to grapple with forced financial changes,” said Parrish. “We are in an environment where people are coming into retirement, sometimes faster than expected, without an approach to converting their pot of money into a stream of income, and yet they are looking at increased life expectancy, increased risk of a long-term care event, and decreased prospects of having their needs covered by Social Security and employer plans. This is a clarion call for financial advisors to help their clients increase financial literacy and, together, craft a plan for a successful retirement.” 

For more information about the 2020 Retirement Income Literacy Survey results and to take the quiz, visit



The American College of Financial Services commissioned Greenwald & Associates for the study. Respondents were asked a number of knowledge, behavior, and attitudinal questions to assess retirement literacy among individuals who are approaching or already in retirement. Information for this study was gathered through online interviews with over 1,500 Americans conducted between April 29 – May 18, 2020. To qualify for participation in the study, respondents had to be ages 50-75 and have at least $100,000 in household assets, not including their primary residence.


The American College of Financial Services was founded in 1927 and is the nation’s largest nonprofit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has educated one in five financial advisors across the United States and offers two master’s degrees in management and financial services, along with prestigious financial planning designations such as the Retirement Income Certified Professional® (RICP®), Chartered Life Underwriter® (CLU®), Wealth Management Certified Professional® (WMCP®), Chartered Advisor in Philanthropy® (CAP®), Chartered Special Needs Consultant® (ChSNC®), Chartered Financial Consultant® (ChFC®), and education leading to the Certified Financial Planner™ (CFP®) certification. The College’s faculty represents some of the foremost thought leaders in the financial services profession. Visit and connect with us on LinkedIn, Facebook and Twitter.


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